Songwriters and State resources – today’s judgment in the BASCA case

In today’s judgment in the British Academy of Songwriters, Composers and Authors (BASCA) v Secretary of State for Business, Innovation and Skills case, Green J allowed the application for judicial review of the new section 28B of the Copyright, Designs and Patents Act 1988, which creates a private use exception to copyright. He did so on the basis that the evidence relied upon to justify the conclusion about harm was inadequate. Along the way, however, he rejected numerous other arguments, including one introduced at the last minute by the intervener, ISM, that the introduction of section 28B without a compensation mechanism amounted to unlawful State aid to the “tech sector”.

ISM’s State aid argument turned on the conclusion in the Updated Impact Assessment for section 28B that the exception would create substantial benefits for technology firms, and in particular cloud service providers. ISM argued that by choosing not to charge for that benefit the Secretary of State had foregone State resources and thus conferred State aid upon the firms benefiting from the legislation. The Secretary of State countered that the State aid case should fail “at the first hurdle” on the grounds of absence of effect on State resources.

Green J is no stranger to debates about State resources, having argued the point in the Eventech case (together with the present UKSALA blogger) very shortly before his elevation. Indeed, he cited the Eventech judgment in his reasons for rejecting ISM’s State aid argument. The crux of the point was the link between the revenue allegedly foregone by the State, and the benefit to the sector created by section 28B. The judge’s conclusion was that, if the State resources argument turns on a foregoing of revenue, there must be “a clear and direct nexus of a relatively formal character between the advantage and the foregoing of revenue” (para 311). In the present case, however, the supposed diminution of revenue was merely “hypothetical, remote and indirect” and the corresponding alleged aid was “no more than an estimation of a diffuse advantage spread across a wide class with no clear share or definition or formality to it” (para 309).

In terms of the use of State aid as an incidental adjunct to more traditional grounds of judicial review, therefore, another one bites the dust. This is, however, not a surprising judgment. While the European Court has said that the effect on State resources does not have to correspond precisely to the advantage conferred by an aid, there must at least be “a sufficiently direct link between, on the one hand, the advantage given to the beneficiary and, on the other, a reduction of the State budget or a sufficiently concrete economic risk of burdens on that budget” (Cases C-399 and 401/10 P Bouygues v Commission EU:C:2013:175, para 109).

Such a link existed in respect of the NOx emissions trading scheme in Case C-279/08 P Commission v Netherlands [2011] ECR I-7671, where the benefit consisted in emissions trading allowances which could be characterised as intangible assets and which had a specific value. But the judge pointed out that facts of the present case were rather remote from those of the Netherlands case. A similarly direct link does not arise merely because a piece of legislation confers some sort of general benefit on a particular group of undertakings, in circumstances where it would be theoretically possible to impose a charge on those undertakings.

This blogger cannot help thinking, however, that the present case illustrates the difficulty of relying on the State resources condition to sift the wheat from the chaff. The present case might have been rather different from the facts of a case concerning emissions trading. But in other cases it might be more difficult to decide whether the link between advantage and State resources is sufficiently direct. In such cases, the selectivity condition may provide a more principled dividing line. Green J alluded to this at para 313 of his judgment, where he commented that any benefit conferred by the introduction of the copyright exception in section 28B must be regarded as “inherent” in the scheme of that legislation. As the judge said, even if there was a benefit that could be said to involve a budgetary debit, that benefit was merely an “incidental consequence of the introduction of a measure designed to meet other legitimate aims and objectives … If the Intervener’s case was correct then many pieces of legislation would be capable of amounting to an ‘aid’ simply because they conferred a collateral benefit upon a definable category of natural or legal persons who were in business.”

Various commentators have expressed the opinion that the selectivity condition (to which the judge was implicitly referring here) is a better means of distinguishing between State aid and general measures. So far, however, like the Secretary of State in this case, the European Court seems to favour the rather blunter instrument of the State resources condition, and has rejected the various invitations to Let it Go. On that note, this blogger wishes her readers a sunny and tuneful weekend.


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